 Well, thank you. It is indeed such an honor to be invited to give this year's gamble lecture I'm genuinely touched and I'll be frank proud to be included in the list of the economists who have given this lecture I'm also delighted to get to visit Amherst and in beautiful fall no less so my husband David who is here with me I grew up here and Amherst has been an important part of our lives. I actually that wedding that that the ounce Mentioned took place here in Amherst and the first congregational church and David's father who's also here Is is is still in Amherst Now actually Amherst has figured surprisingly prominently also in many of our family Empirical discussions because the way that David conceptualizes and evaluates the plausibility of any statistic is to turn them into Amherst equivalents so for example if someone claims that One in 20 people cheat on their taxes David will say well that means in a town the size of Amherst There'd be 2,000 fraudulent claims I'm not sure I believe that Or if someone says 25% of people own cats He will calculate that that would mean in the town of Amherst There are 10,000 cats and then start counting how many of his childhood friends had cats and I find this technique somewhere between endearing and really annoying But I think it just goes to show you that you can take the boy out of Amherst But you can't take the Amherst out of the boy All right. Well, so in my lecture this evening I do want to talk about the aftermath of financial crises. What happens? after a meltdown in a country's financial system and why and This is a topic that has been Something that David and I have been doing joint research on for the last few years But as Leon's mentioned, it's it's also personal But actually in November of 2008 as he mentioned I was tapped to chair President Obama's Council of Economic Advisers and it did become my job to help craft the policy response or during the heart of the 2008 crisis and the terrible recession that followed and you know, even though I had studied the Great Depression of the 1930s as a research I wasn't prepared for the very real pain that was emerging after the collapse of Lehman Brothers in the fall of 2008 and I remember vividly the end of my first week in Washington so that Friday the employment report for November of 2008 was released and it was awful. We not only had employment fallen by about half a million jobs in November, but we discovered that our statistics for the previous two months Had not been as bad as they actually were and so that all told employment was down about three quarters of a million jobs And I was called out of a meeting to brief the president-elect who was still back in Chicago by telephone And I was practically incoherent. I just kept saying I'm so sorry the numbers are awful Oh my goodness. This is terrible and finally after several minutes of this President Obama finally stopped me Christie, it's not your fault yet Well in the years following the 2008 crisis a somewhat fatalistic Narrative took hold. I think as countries throughout the world sank into deep recession both economists and pundits Seemed to adopt the view that it was just Inevitable that the aftermath of a financial crisis is always awful that the recessions Following a financial crisis are just something to be accepted and ridden out sort of like a bad stomach virus For which there's no treatment. You just suffer for a while perhaps a long while and then wait for it to pass But you know this didn't fit with what I thought I knew about previous financial crises particularly The Great Depression in the United States you know because in in sort of popular discussions the Depression is often cited as almost the quintessential example of a financial crisis Leading to a horrific downturn, but that's really much too simplistic The Great Depression in the United States started in the summer of 1929 but the first wave of trouble in the banking sector didn't occur until more than a year later Moreover the financial crisis of the 1930s wasn't a single event But in fact a series of banking panics each interspersed with periods of relative calm in the financial system Now Milton Friedman and Anna Schwartz in their classic book a monetary history of the United States show that there were four distinct waves of Financial panic or banking panic in the early 1930s and here's my my first slide Shows you I've just put in vertical lines on the dates of those four banking panic So the first was in October of 1930 followed by another in the spring of 31 an even worse one in the in the fall of 1931 when Britain decided to go off the gold standard and then the last wave which was arguably the worst happened at the end of 1932 or the beginning of 1933 sort of just as Franklin Roosevelt was coming into office and what's actually striking about these four waves of panic is the variation in Outcomes after the different waves in the depression so in this picture I just added a graph of industrial production, which is sort of our best broad indicator of economic outcomes that we have available on a monthly basis in the 1930s and what you're supposed to see is that after the first three waves of banking panic absolutely output fell and in fact it plummeted But after that fourth wave, which as I suggested may well have been the worst output recovered Incredibly quickly industrial production actually surged about 50% just between March and July of 1933 Well in our recent work David and I try to look at the aftermath of modern financial crises sort of more systematically and But far the most important finding is that the aftermaths of crises are not all the same I in fact the outcomes can indeed sometimes be wretched But they can also be remarkably benign and we then go on to try to understand why Some aftermaths of crises are so much better than others and it turns out that what happens after a financial crisis Depends fundamentally on the ability and willingness of governments to use the tools that they have Specifically monetary and fiscal policy to heal the economy So far from being inevitable How much output falls after a crisis is largely under the control of policy makers All right. Well the heart of our new research project has been the Derivation of a new series on financial distress for a large sample of countries since World War two Now you might think that when financial crisis occurred is obvious But it's not and one sign of that is there's actually substantial disagreement Across the existing crisis chronologies Scholars have very different views not only when but even if a country had a crisis I and part of that Part of the reason for that is that Financial problems are not a zero one variable like most things they fall along a continuum And it's often not clear where normal stops and a crisis begins Moreover, there's not some simple reliable statistical indicator of Financial distress economists keep looking for one, but they all have problems. So for example Economic theory suggests that the difference between the interest rate on a risky loan and the say the interest rate at which The US government can borrow which should be a very safe Loan can be used as an indicator of trouble in the financial system Right so the difference between the interest rate on a risky loan and a safe loan is an example of what economists call an interest rate Spread and if banks are under stress or having difficulty raising funds It makes sense that such interest rate spreads might rise But it turns out that times of fine that in times of financial distress Banks sometimes choose to simply ration credit rather than to increase interest rate spreads So this picture is going to show you one such example of a spread between the interest rate on commercial paper That's going to be a risky loan and the US and a US government bond Which is a safe loan in the early 1930s and again I put those dates of banking panic so you can see when they happened and what you can see is that Sometimes spreads do rise a little around the time of a panic, but sometimes they fall there's there's really not a Systematic relationship and Such problems in most statistical indicators of financial distress is what led led David and me to think that we need to go in a different direction All right, so to come up with our new measure of Financial distress we're going to use an approach that's very common in our research and it involves old-fashioned books All right, we use narrative sources to deduce Quantitative information that can be incorporated into a statistical framework and the fundamental idea is that there's often a great deal of information on in Contemporaneous narrative accounts be they newspapers government reports Presidential speeches that can be systematically collected and converted into a quantitative indicator So for example for a study we did many years ago We identified every Legislated tax change in the United States since World War two and then classified them according to their motivation And this helped us to identify the causal impact of tax changes on the economy Well in the case of financial crisis We're going to use a single narrative source That's something called the OECD economic outlook to identify and scale Financial distress for a large sample of countries so the OECD is kind of a quasi governmental international organization that Includes mainly economically advanced Democratic countries and their economic outlook is imagine a 300 page book that's published twice a year Sort of summarizing economic and financial conditions in each OECD member country so what we're going to do is to Define what we mean by financial distress We're going to think of it as a rise in the cost of credit intermediation Something makes it more expensive more costly for financial institutions to provide credit to borrowers businesses and or households at a given safe interest rate It could be a rise in their funding cost because they're having increasing loan defaults It could be an increase in the cost of monitoring or evaluating borrowers Or perhaps there's a law a widespread loss of confidence that chokes off funds for banks And what we do is to specify detailed criteria for how to translate the OECD analysts words about the health of the country's financial system Into a numerical scale of financial distress For example, do analysts suggest that banks are having difficulty? Raising loanable funds. Do they describe a panic or a crisis in the financial system? Our credit worthy firms and households finding it difficult to borrow and Our scale of financial distress. We're gonna to scale things from zero to 15 So a zero on our scale means no financial distress. The financial system is just working fine a Seven corresponds to quite significant troubles in the in the financial system and and an impairment in the supply of credit So a crisis of some sort and then numbers of 12 and above sort of correspond to complete chaos In the financial system and really a total breakdown in financial intermediation And then armed with these criteria We then sit down and read the 300 page volumes for every half year and we sit at our dining room table and we debate and compare and reach a Conclusion about the degree of financial distress if any in each OECD country every June and December back to 1967 and then we write a really long detailed explanation for why we scaled things the way we did so that other scholars can can check us and and decide if they agree with our Interpretation of the narrative sources. Here's what comes out of our Analysis, right? So this slide shows our new measure of financial distress for our 24 advanced economies from 1967 to 2012 One thing you'll notice is that there was basically no financial distress in any OECD country In the 1960s 70s or early 1980s That's really a tribute to the fact that the Regulatory structure that was put in place after World War or after the Great Depression Protected the world financial system to just a remarkable degree in the early post-war period Next you can see that there were some localized episodes of significant financial distress in the mid 1990s through the early 2000s so for example a number of Scandinavian countries had Financial crises in the early 1990s and then the black line that you see running through Elevated for a very long period. That's Japan which had some financial distress Really from the beginning of the 1990s through the mid 2000s and then finally you can see that spaghetti That pile of spaghetti there at the end That's 2008 when all hell broke loose in the financial system and literally every advanced economy Had at least some financial distress in this episode But again, there's actually a wide range. There's tremendous financial distress in the United States the UK Iceland But then other countries like Japan and Australia really had very minor amounts of distress We also see very different sort of patterns and how distress evolves Over time in countries. So in the United States in the UK We had a terrible run-up in financial distress then pretty quickly the financial system Got back to working fairly normally But then they're the countries of southern Europe that even as late as 2012 are still Not having a well-functioning financial system All right, so that's that's our new measure of financial distress having to do that We can then look systematically at what happened to output afterwards Now this is probably not the place to discuss our statistical specification in detail But I think it's important to mention that we have one because actually much of the research in this area has been I think much too Informal that it's often relied on just sort of eyeballing the data and being quite generous about attributing any output movements even vaguely around a financial crisis to the crisis itself Well, we're gonna do it instead and I said I wouldn't show you the specification, but Here it is what we're gonna do is to run a panel regression of Output in our 24 countries at various horizons after time t So that's gonna be the y variable on the left on Financial distress at time t. That's the f variable And what this is gonna do is to allow us to estimate how output behaved in the wake of distress And we're gonna measure output as a country's real GDP Importantly in this regression, we're gonna include country and time specific effects So that we're estimating how much of the cross-section variation that we see in the behavior of output is explained by each country's experience of financial distress and One finding is that the average aftermath of Substantial financial distress is pretty bad All right, so this picture is going to show you the average estimated response of output to a realization of a seven on our Scale of financial distress. So remember a seven is kind of a medium amount It's a crisis of some of some sort in the financial system a wide spread impairment of the functioning of the banking sector But not a total breakdown and what you can see is that real GDP fell on average about six percent Following such a crisis and that believe me as a substantial recession The other thing you can see is that the effects are very long-lasting But you know that that average impact Obscures what we think is an even more important fact and that is that there is tremendous variation in aftermath And one way that we try to investigate this is to is to focus on the the 19 episodes Where financial distress reached crisis proportions in some country and we just do a very simple Forecasting exercise we're going to look at a regression of output Just on its lagged values its own history and see what that would lead you to predict what happened in each episode And that is the the forecast of output in and the affected country is just paced on What happened to output before it's past history and if actual GDP in the country is much smaller than that Simple forecast would predict that is the forecast error is large and negative That would suggest that the crisis had a depressing effect on the economy All right, so here are the results All right, so in nine of the episodes the forecast errors are very small or even positive Right that is output grew the same or faster following a financial crisis Then a simple forecast would lead you to predict so for example Norway that's the red line actually grew substantially faster following its 1991 crisis then one would have predicted just based on lagged output in these cases It's really hard to see that that the crisis had much of a negative effect at all All right, so then this picture shows you for the episodes where the forecast errors are sort of moderately negative suggesting that the crises in these countries had medium-sized adverse effects and Then in six of the episodes the forecast errors are negative and Enormous right suggesting very severe consequences of crises, so Japan that's that dark blue line experienced a profound growth slowdown following its crisis of the late 1990s that resulted in much worse economic performance than one would have predicted just on the basis of lagged output and Then the yellow line is poor Greece That where output has been far far worse following its crisis in 2009 Then one would have predicted So based on this and other evidence we think that it's clear that a financial crisis Can be a death blow to the economy as it has been in Greece, but it doesn't have to be we can be more like say Norway from 1991 Okay, well having found this variation in the aftermath of financial crises David and I then seek to explain it and hear the the experience of the Great Depression. I think is also Relevant so remember this is that picture that I showed you before of industrial production and what happened after the four waves of panic in the 1930s right and if you ask Why is it that the first three waves of panic were followed by? Terrible declines in output, but the fourth one was followed by a rapid recovery I think the answer is pretty clear right and that is the policy response was very different After the early waves the Federal Reserve that conducts monetary policy responded by doing Nothing It stood by and let banks fail There was a drastic decline in the money supply as people pulled their deposits out of the banking system and shoved it as cash Into their mattresses and the result was really a complete drying up of credit for businesses and consumers worse yet in September of 1931 the Federal Reserve went from negligent to Actively harmful so it it raised interest rates Substantially despite the fact that unemployment was already 20% to try to defend the gold standard And then just to complete the story on the fiscal policy side Herbert Hoover decided that in 1932 that would be a great time to have a major tax increase And and it came about because he saw that the budget deficit was going up because Everybody was unemployed and so tax revenues were low and so decided. How do we deal with this? I know we'll just have a big tax increase. So it was the largest peace time a tax increase in American history Right there in the middle of the Great Depression Well, the results of these very counterproductive Monetary and fiscal policies was that the banking panics kept recurring and the real side of the economy was just completely devastated All right, but the policy response to that fourth wave of panic in 1933 Could not have been more different. So Franklin Roosevelt came into office right in the middle of that panic And if you know your history, you know that in his inaugural address He said that he would fight the Depression with the same vigor. He would an invading foe and he did right? He declared a nationwide bank holiday to allow Cooler heads to prevail and so to stop the downward spiral in the financial system He took us off the gold standard and found a way to expand the money supply without the cooperation of the Federal Reserve And he undertook aggressive fiscal stimulus so fiscal stimulus just refers to deliberate increases in the budget deficit that are brought about by things like tax cuts or an increase in government spending and During the New Deal the government spent freely on things like the Works Progress Administration at the Civilian Conservation Corps and These temporary public employment programs put income into the pockets of millions of unemployed workers They also brought about just some massive improvements in our infrastructure, and this is just a picture of All of those iconic log buildings in our national parks were built by the Civilian Conservation Corps And actually that the evidence suggests that the that the policy responses during the New Deal In response to the Depression were incredibly effective consumer sentiment turned around rapidly Real interest rates fell dramatically and both investment and consumption rose quickly and the result was that stunning rebound in output in mid 1933 Well drawing on that historical insight what David and I do is to look at the role of Macroeconomic policy and explaining that variation that we found in the aftermath of financial crises Now actually it turns out it's it's very difficult to look at the contribution of policy Directly and the reasons the following we'd expect countries that were facing more severe Output declines following a crisis to use policy more aggressively so one could find that a stronger policy response was correlated with worse outcomes, but Causation in that case would move from would be running from worse outcomes to more policy not the other way around So what we do instead is to focus on the ability of policy makers to take action That is the the room that they have to maneuver an economist sometimes refer to this ability to undertake policy as Policy space and so for example a simple way to ask if Country central bank can can undertake monetary policy is to look at the interest rate that the central bank targets We sometimes call this the policy interest rate in the United States It's the federal funds rate and if that policy interest rate is Noticeably above zero when the crisis starts then Policy makers have at least some room to cut interest rates But if the policy interest rate is already effectively zero right then monetary policy makers are going to be severely constrained in their ability to aid the economy Similarly a straightforward measure of fiscal policy space is the government's debt to GDP ratio So debt to GDP is just a measure of how much a country has borrowed in the past or how much debt It's run up and if it's low policy makers have Plenty of ability to use fiscal stimulus if it's high They may be reluctant or even unable to take actions like Roosevelt's large public works program Now importantly such ability to use monetary and fiscal policy is likely to be termed not by a country's current situation But actually by more fundamental long-run characteristics. So for example public debt loads reflect whether a country is generally fairly fiscally responsible like Germany or persistently lives outside its means like Greece or Italy Likewise prevailing Normal interest rates largely reflect typical inflation. So for example Inflation has been low or negative in Japan for roughly the last 25 years and their normal interest rates have been consistently very close to zero Now at the same time Policy space tends to be correlated with the policy response to a crisis So countries that are able to use monetary policy because they have space tend to use it and so the Estimated contribution of policy space is really going to be a way to gauge the impact of policy That's less tainted by sort of the the reverse causation issues that I mentioned All right, so for our empirical estimates of the role of policy space We're going to use a variant of our regression approach for estimating the typical aftermath of a crisis That allows the aftermath to differ according to policy space and for those of you who are interested in the nitty-gritty of our analysis What we do is to augment our panel regression of GDP on financial distress to include an interaction effect between financial distress and Policy space and if that interaction effect is is estimated to be positive This indicates that the aftermath of a crisis is better or at least less bad when there is policy space All right. Well, the findings are actually dramatic that interaction effect is indeed positive large and highly statistically Significant countries do better following a crisis if they face financial distress with both monetary and fiscal policy space This graph shows you just how much better, right? So the figure shows you what typically happens to output following an episode of Substantial financial distress a crisis of some kind when a country has both types of policy space Both monetary and fiscal space or when it has neither a type of space And what you can see is that when a country faces a crisis with plenty of capacity to undertake Monetary and fiscal policy. That's the red line The aftermath is actually pretty benign essentially no fall in output at all But when a country faces a crisis without either type of policy space, that's the blue line The aftermath is horrible. I have fallen output of about ten percent I and and let me just show you two examples of Countries that kind of fit into each of the one of these categories So on the left, I have a picture of Norway following what happened to its real GDP Following its crisis in 1991 so that vertical line shows the start of a lot of financial distress well, importantly Norway began that crisis with interest rates around eight percent so the Norwegian Central Bank had plenty of room to cut interest rates and thanks to the fact that Norway has lots of oil and therefore a very Lucrative sovereign wealth fund they have a very low debt to GDP ratio So they had a lot of ability to undertake fiscal expansion as well And what you can see is that real GDP Barely paused following the start of Substantial financial distress I so that's that's part of that's an example of a country that starts a crisis with both types of space The country on the right is Portugal following the 2008 crisis. So Portugal's financial system continued to have a lot of trouble well after 2008 into 2009 2010 and At that time by then the the European Central Bank was at the zero lower bound They could no longer cut interest rates. So they really couldn't do much in the way of monetary stimulus Portugal also began the 2008 crisis with a debt to GDP ratio that was substantially above the OECD average And so it had relatively less ability to undertake expansionary fiscal policy and what you can see is that output in Portugal fell sort of Roughly continuously for the four years following the start of the crisis that that vertical red line All right now another finding of our research is that not only does policy space matter But it appears to matter Primarily through the expected channel, which is when policymakers have more policy space They use it right they take more aggressive Policy actions. So let me just show you the behavior of fiscal policy All right So a useful summary measure of what's happening in fiscal policy are changes in the high Employment budget surplus. So the high employment surplus just shows you what the budget surplus would be if we were at full employment So for example, it takes out any movements in the budget surplus cause because Tax revenues naturally go down when unemployment goes up. Alright, so a fall in the high employment budget surplus Indicates deliberately expansionary fiscal policy. The government is cutting taxes or increasing government spending All right, so this picture is going to show you what happens to fiscal policy following a financial crisis in countries that start the crisis with plenty of fiscal policy space and and or relatively low debt-to-gdp ratio or countries without fiscal policy space a relatively high debt-to-gdp ratio That blue of the red line shows you the case when a country does have plenty of fiscal policy space They cut their high employment budget surplus a lot. All right, so we we run big budget deficits high employment budget deficits The blue line shows you what happens in countries that start a crisis with already having a high debt-to-gdp ratio Notice not only do they not, you know, cut the high employment surplus. It goes in the wrong direction. They actually run Contractionary policy. They're increasing taxes or they're cutting government spending All right. Now this picture is just going to show you two sort of telling examples So the the one on the left is the United States following the the most recent crisis it started a little earlier here in the end of 2007 and What you can see is that exactly what you probably know happened that We started that crisis with a relative the crisis with a reasonable debt-to-gdp ratio and you can see that we ran Very substantial deliberate budget deficits. We had a big fiscal stimulus in 2009 and 2010 The country on the left is Italy in the same crisis the 2008 episode But they started the crisis with a debt-to-gdp ratio of over a hundred percent so far above the OECD average and What you can see is that what Italy ended up doing following this crisis is they took measures to actually Push its high employment budget Into surplus so Italy cut government employment They reduced public pensions and they raised taxes and this is unquestionably something that further hurt output and employment and employment Now an obvious question is why would countries ever do that right and actually a New paper that David and I are working on actually looks in depth at What various factors might explain the behavior of fiscal policy and why sometimes it goes so far astray? after a financial crisis One possibility is that countries with high debt may in fact be forced to take these sort of counterproductive fiscal contraction either because they lose access to private capital Sometimes it's as a condition for aid from international agencies like the IMF So for example, why did Greece undertake a big fiscal contraction in 2010? It was one of the conditions of the bailout from the IMF in the European Union But there are other reasons as well for example politicians may have faulty models of how the economy works and that may be to blame so Leonce mentioned the role of sort of ideas about austerity, right? They may politicians may mistakenly believe like Herbert Hoover did that Getting the budget down is actually you know the budget Deficit down or pushing it into surplus is actually good for the economy and an example of this from the 2008 episode is the UK. So in 2010 and a new government comes in David Cameron is the Prime Minister George Osborne his Chancellor of the Exchequer and they were just convinced that fiscal austerity was was the answer and What you notice is Britain actually undertook quite Contractionary policies the other thing that you notice is Britain which had been recovering nicely from the Great Recession Leveled off went down for a while and actually languished for a couple more years All right now just as fiscal policy makers are more likely to take aggressive action when they have Fiscal space you probably won't be surprised to hear that monetary policy makers are more likely to cut interest rates if they have Monetary policy space and indeed our regression results show that when countries start a crisis with plenty of room To cut interest rates they cut them on average about two percentage points And when they start a crisis with interest rates at zero they stay at zero Let me rather than showing you all the same pictures. Let me just show you two examples that kind of really captures this One is the US in Around 1990 so you may remember we had a crisis in our SNL The savings and loan part of the financial system. It really bubbled to a head in In 1990, but one of the things that in 1990 the US was starting with policy interest rates that federal funds rated over 8% and Absolutely, the Fed had room to cut interest rates and they did they cut them about five percentage points We had a big monetary expansion And I think that's part of the reason that we don't remember the SNL crisis as being this horrible meltdown in the economy because effective policy actually mitigated a lot of the effects on output and employment on the other hand the the right hand picture is Japan so Japan's history is they had in around 1990 the same thing that we had in 2008 So a bubble and bust in their housing market that then Caused trouble in the financial system By the time they had really severe trouble so around 1997 Interest rates were already down at zero and you can see that they had nowhere else to go right the Bank of Japan really couldn't do much To try to deal with the aftermath of the meltdown in the in the financial system And I think that's one of the reasons why that the profound slowdown in growth that Japan experienced is because they lacked an effective policy response So the bottom line of all of this analysis is that the ability and willingness To use our tools fiscal and monetary policy make a huge difference in the aftermath of financial crises What happens to an economy after a financial crisis is not inevitable it rather But rather substantially in the hands of policy makers All right, so where does all of this leave this it'll leave us well, you know I Described at the beginning sort of the the fear and concern that I felt about the economy when I arrived in Washington in late 2008 the financial crisis was in full swing and output and employment were just sort of plummeting in front of our eyes But I also remember when that fear Started to recede it was actually Exactly one year later when the employment report for November of 2009 came out Now everyone myself included was expecting another significant job loss But when the numbers came across my desk the night before they're released to the public They were much better than expected and actually this is one of the times when I just ran over to the Oval Office To give the president the the news in person and I literally shouted we only lost 11,000 jobs and You would have thought that I had given President Obama the best news ever. I Literally got four hugs and a kiss Now the US economy turned the corner a year after the crisis in Large part because of the aggressive policy response When financial markets froze and employment began to plummet the Federal Reserve cut interest rates rapidly The Fed also sought to expand credit in other ways So for example when no one wanted to buy commercial paper the Fed says okay, we'll buy it So that firms could still finance payroll and other operations On the fiscal side just a month after President Obama's inauguration He signed the American Recovery and Reinvestment Act which provided roughly $800 billion of fiscal stimulus spread over two years This included a temporary tax cut for working families increased unemployment benefits and food stamps transfers to state and local governments and a big chunk of infrastructure investment in fact the Recovery Act provided substantially more fiscal stimulus than was done in Roosevelt's new deal Now I'll be the first to admit that that not all of the fiscal stimulus was as effective as we might have hoped So for example many people seem to have used their tax cut to pay down debt rather than to keep spending and The infrastructure spending though very useful in the long run Was painfully slow to ramp up and to put construction workers back to work but now sort of ten years later a number of very careful studies have been done and Almost to a one they suggest that the stimulus contained in the Recovery Act Just paid a crucial role in helping to stop the crisis and stem the collapse of the American economy in 2009 and 2010 now Importantly the US government could take those actions in large part because we had policy space Interest rates weren't high at the start of the crisis But the Fed was able to cut the federal funds rate by five percentage points before it hit zero and The US debt to GDP ratio was low enough that we face no market pressure to hold back on fiscal stimulus And as I said those policy actions, I think just made a huge difference Even with them the aftermath of the 2008 financial crisis was pretty awful But without them we well would have could have faced a second great depression So now comes the question if we want to be able to respond to future crises as we did back in 2009 We need to maintain our policy space. So how do you do that? Well first on the monetary side What the Federal Reserve and and other central banks need to do may sound somewhat Unintuitive, but they actually need to keep inflation from drifting too low And the reason for this is that a fundamental determinant of normal interest rates is Inflation right one thing that any lender cares about is that the interest rate that they earned Keep up with inflation So if we want normal interest rates to be safely away from zero Inflation can't be too low or negative for example as it's been in Japan for the last 25 years That's why they had no monetary space in 1997 I will this picture is going to show you what's happened to inflation in the US in Sort of the last 15 years and that gray the light gray area the Christ is the the Great recession the recession following the financial crisis and the red line is the feds sort of Explicit target that they're trying to keep the inflation rate at about two percent what you can see is that inflation fell during the crisis and That it's been below that that two percent target of the Fed for most of the last ten years That's a key reason why Interest rates today are still So low and have been for most of the last or for all of the last decade It's also why the Fed took all those actions that you probably heard about right those several rounds of quantitative easing To try to heal the economy and get wages and prices rising gradually again You can also see that inflation in recent months has been edging back up to that two percent target So it's probably natural for the Fed to be dialing back on some of its extraordinary actions and starting to to raise interest rates But you'll also notice that inflation has flirted with with two percent before in the last decade only to fall back down To to low levels a few months later So I'd say that the Fed needs to be cautious and move very gradually They need to be also ready to change course if inflation declines again Or else we could find ourselves kind of in a world of perpetually low interest rates And thus we could face whatever comes our way a future crisis of recession Without much ammunition the ability to cut interest rates The in in in our hands On the fiscal policy side what governments need to do to maintain policy space is Much more intuitive and actually very simple They need to avoid large budget deficits in good times So that public debt remains under control for the bad times, right? But that would do if you if you keep your budget deficit under control in good times that gives policymakers the ability To run deficits to do fiscal stimulus when we actually need it Sadly, this is an area where the US has been having some trouble recently. All right, so this This picture is going to show you the Congressional Budget Office's most recent data on projections for the US debt to GDP ratio and you can see that debt ratio climbs substantially during the crisis as Tax revenues fell and the government took aggressive fiscal action to deal with the crisis but then that debt to GDP ratio had leveled off as the economy recovered and Policy became less expansionary Well last year fiscal policy became very expansionary again We had a big tax cut and something that people noticed much less. We also had a big increase in Government spending and what you can see is that the CBO is is projecting that that debt to GDP ratio is going to be rising steadily Over the next decade indeed. It's expected to top a hundred percent within the next ten years If we don't change course that's going to make us very make it very hard for us to undertake fiscal stimulus if we have another crisis or some other shock So I guess ultimately my message this evening is both to be one of both hope and Caution so it's a message of hope that the fight in that the financial a financial crisis Does not have to be a death blow to the economy right the evidence from past crises is that the policy response? matters tremendously The aftermath of a financial crisis can in fact be quite mild if monetary and fiscal policy are used aggressively The tools work when we use them The message of caution is that you need policy space to use policy a key reason that policy makers Sometimes don't respond Aggressively to a crisis is that they're constrained by very low interest rates or high debt loads So I think as economies throughout the world start to return to normal They need to actually be working and thinking about Regaining policy space if we don't I fear we could face future financial crises With much less room to maneuver than we had say in 2009 and history shows us that the aftermath of a crisis in Such circumstances can be very bad indeed. Thank you so we're going to take questions for Those who want to ask questions, please come over and introduce yourself and Bill Gibson from the University of Vermont Department of Economics was saving Lehman brothers outside of the policy space of the United States and Should it have been and if you want to if your answer is next question. I'm totally Actually tell you so there is a wonderful new book by Graduate school classmate of ours by Lawrence Ball that said in fact rescuing Lehman brothers was completely within the policy space of the United States within the feds legal mandate and Whatever so and I think I mean one of the things that we learned is that Letting it go down set in train just a horrific downturn, so Horrific crisis that then led to a horrific downturn. So I think that certainly suggests it It should have been within our our Our policy realm and it actually it brings in such an important point because You know a lot of times when people think about you know the response to the financial crisis of 2008 they'll say oh god Why did you you know bail out the banks and I think the best answer is we were not doing it because we cared about the banks we actually cared about people and if you let the banking system go down as we did with Lehman brothers you set in motion a Collapse of your financial system that doesn't just affect the stockholders of big banks or the people employed by big banks It affects ordinary people that lose their job lose their homes And that's why you do it and we certainly had many times Remember poor president Obama saying tell me again why I'm helping AIG. I mean it's like nobody wanted to help AIG But it's the responsible thing to do if you actually care about people Hi, I'm John. I'm a sophomore economic student I was wondering if your work has looked into how inequality may affect the policy response after a crisis That's a great question. I think you know, so one of the You know a lot of the if you think about our sample, right? So say some of the crises that happened say back in the 1990s We're at a time when still income inequality was not particularly high They're not as high as it is today in the US and other countries Whereas 2008 came after inequality has been rising substantially And my guess is that and this is something that economists are working on, but I don't think we have definitive answers I think inequality both may Be something that tends to have effects on financial distress that you know, what goes on in the stock markets or You know irresponsible kind of financial transactions may help to increase inequality and make your financial system vulnerable But I think your point that the Rising inequality also has implications for the effects of financial crises You know if the people for example who lose their jobs are the ones that are also the people that tend to be Spending every penny that they earn right that could have quite a contractionary impulse Whereas if you know the people that are losing are the very wealthy who wouldn't really have spent it been buying much And so it can have different effects. It also affects the the policy response. I think we now Realize much more that you know You have to think about who's getting the tax cut or who's getting the the extra government spending I think when people have looked at the numbers, you know Some of the best money that was spent well It came in several places one was the direct aid to the unemployed So increased unemployment benefits increased nutritional support that was fun Those were funds that were spent immediately had a big bang if you want for the amount that they cost The other one that had a really big bang for the buck is aid to stake in local governments So that's an example of Congress hates that right if you just give money to the states Congress doesn't get any of the Credit they didn't you know build the bomber or build the you know, whatever and yet it turns out in 2009 one of the things that we saw is a lot of state governments have a balanced budget requirement and They were seeing their tax revenues just plummet and so we could see that these a lot of states are gonna have to be Laying off teachers and first responders and you know cutting back on a lot of programs And so a big part of the recovery act was about a hundred and fifty billion dollars to just give money to the state so they didn't take these actions and The estimates are that that kind of money was just incredibly valuable And so it's not directly related to inequality, but it gets at the point that That the that how the economy is structured matters for what the best response is gonna be and that definitely is important What else Sure, everybody come on up come on down or whatever Good evening, so I am a lawyer I'm based out of India basically and we worked with the Ministry of Finance there in drafting a resolution law for Financial firms so because there is no such law in existence at present So it was a part of India's G20 commitments and based on the FSB Recommendations and what lot of laws like that have come up in the aftermath of 2008 So my question specifically is about as a policymaker your view on the political aspect of the sort of Lawmaking because what happened in India was that after the law was Drafted and introduced in the parliament There was a lot of political backlash against some of the unpopular Provisions of the law and then it and also India Goes to elections next year so very important general elections and then the law was withdrawn By the government like a very very hasty retreat and a lot of that is happening here as well So how do you think as a policymaker you anticipate and then deal with these sort of challenges? All right That's a that's a great question and it's it's even broader than sort of the particular example you're thinking of because Right, so I mentioned how we had basically no financial distress for the three decades after World War two or Roughly and that I think almost everyone agrees we put in place a regulatory framework after the horror of the Great Depression that really protected the financial system for a good 75 years and one of the things we tried to do in 2009 and not just in the US but across Many countries are put into place new financial regulatory reforms the sense that our regulatory structure hadn't kept up with sort of the financial innovations that had happened and We did make progress so We did pass Dodd-Frank that has some some good things in it But I think like what you're describing in India it Didn't go far enough and I think this is a place where you know the tremendous amount of money in finance the Ease of using that money to lobby your congressman you definitely see this Sort of a certain amount of watering down of some of the the provisions and so I don't know that there is so as a policy as a former policymaker is something I find very worrisome and I'm not sure I have the the right answer other than you know try to have a Political system that that actually Reflects the the will of the people because I think most people you'll want our financial system to be very safe I'll give you an example I think one of the things that was done in Dodd-Frank It was probably the most important was higher capital requirements so that financial firms have more skin in the game And so if there is a crisis or a problem the first people to take a lot of loss are going to be The the shareholders of a financial institution That is a good development. We've made some progress on getting capital requirements up I think they haven't come up nearly enough mainly because there's a lot of pushback from Financial institutions and I think this is a place where policymakers and regulators have to just grow a spine and say For the good of the economy ultimately for the good of the financial system We're going to impose higher capital requirements Because we don't want to live through 2008 ever again And I think that that is just a really important point The other thing is that has really struck me is how short memories are right if you know If anyone could just you know go back to 2008 and have that sense of terror again I think Maybe policymakers would not be or certainly our legislators would not be as quick to be watering things down because that was a Truly terrifying time and we truly don't want to experience it again. Yeah Hi, I'm Will Harmer. I'm a senior economic student here at UMass, and I'm just wondering what your Personal like most heterodox position on fiscal policy is and what your most heterodox position on monetary policy All right Have to ask you what heterodox means. No, I'm just kidding policy so You know both because of you know research that David and I have done but that others have done I do think that fiscal policy has very strong impacts And so I am wildly in favor of using it when we need it One part that's a little unusual about me is I don't think we always need it right So I actually think I'm both a big proponent of fiscal stimulus at the right time and sort of a budget hawk in Normal times because I think Precisely because I think fiscal policy is such a good tool to have when you have a real problem I don't want it to be constrained by the fact that you've been running high budget deficits When the unemployment rate is 3.7% so I think that it makes me a little heterodox People are either never do fiscal stimulus or always do fiscal stimulus and I like to think I'm in the middle The other place and it's it's something if I one of the what I view as my failures in Government is as a student of the Great Depression I think those public works programs that I you know showed you us a civilian conservation core building I think they were just incredibly important and in 2009 and 2010 President Obama, I think would have loved to have had one. I think his heart was there and We just couldn't come up with something that we could do I mean I had the experience where I at one point I started calling cabinet secretaries and saying if money was no object, how many people could your department hire and He said oh oh tons, you know a thousand two thousands I like okay, we've lost eight million jobs. That's not gonna get me very far, right whereas Franklin Roosevelt in the winter of 1934 found a way to put four million people on a quick public employment program and so thinking about how to do that is sort of my Passion and what I I think And it is a somewhat heterodox position I think a lot of there were we ran into some resistance of Why should the government be hiring people just you know give them tax cuts? But I think there is if you had a program in your back pocket that you could do quickly You could get people employed you could do useful things with that public employment and Get yourself out of a mess at the same time so I think that is That's that's an important point on the monetary side I think here is Here I am quite heterodox Right, so in modern times you're starting with Paul Volcker back in the late 1970s The Fed and almost every other central bank has said our job is to we're going to target inflation, right? they have that 2% inflation target and You know, we'll be a little bit flexible if we're in a recession Maybe you know we'll you know take some some additional measures but it's very much this inflation targeting system and It served us pretty well like inflation came down and you know it looked like you know what people were writing papers in the Late 1990s about you know the great moderation. We've solved the business cycle We kind of saw that wasn't true in 2008 and I think it's time to actually rethink how central banks do things and So I've certainly been flirting with the idea of something. It's called a nominal GDP target Just because what a nominal GDP target does if you're just targeting inflation and like in the recent case Inflation fell but not all that much The other thing is I showed you that for 10 years We've been below our inflation target and now when it's coming back to almost 2% people say, okay Well, what's done is done and now let's you know just gone to policy and they never say Yeah, but we went through this horrific downturn. We never if you look at the data we never had the the Incredible growth that would get us back say on to the path that we'd been on before and Maybe a different monetary policy framework like a nominal GDP level target that says if you have a period of prolonged decline You have to have a period of prolonged increase to get you back on the same path And so I think central banks throughout the world should say yeah that inflation targeting was great It helped us but maybe in the modern world where we've dealt with inflation and the problem Maybe now is inflation's too often too low or we're hitting up against the zero lower bound on Policy interest rates. Maybe we need to rethink things and so I think that would be important So wonderful question. I had so I'd like to think about those things. Yeah Good evening, my name's son Ed Hoshi, and I was just like the start of by saying what a great pleasure it is to be here Me too I'm an international freshman studying in the economics major At UMass so my question is regarding the recent tax cuts under mr. Trump's government These tax cuts were aimed essentially at the bigger business corporations and Firstly, what is your opinion on these tax cuts? And secondly? How do you think this is affecting the income equality in the United States? All right, so I think I've already tipped my hand a little bit I'll tell you my main reaction when you know when we got the Trump tax cuts was You know, well, I'll give you some background After the original stimulus so the recovery act that was done in February of 2009. I Kept saying well that was great, but you know this thing turned out to be worse than we thought we need more We need more we need more never got anywhere and you know This was at a time when the unemployment rate, you know was going up to 10% it stayed very high You know through at least 2012 I would have given anything for the Trump tax cuts in 2011 or 2012 and then we finally get them, you know, we get them in 2017 when the unemployment rate is now back down to 4% it's like now you do them I so so that's I think a major part of my reaction in terms of You know what they're doing to the economy. I don't think it's an I mean they are stimulatory, right? So just as I told you I think tax cuts do are a powerful tool And so I'm not at all surprised that real GDP is growing at 4% a year Because we've just had a big fiscal expansion And importantly those effects are not permanent you tend to get a temporary boom and then they they tend to wane and so I think That the the main thing that the tax cuts are going to do is give us a temporary boom and then a lot of debt Going forward and so lowering our fiscal space The argument I think that if someone on a from a different viewpoint we're here They'd say oh no those big tax cuts for businesses are going to stimulate growth They're actually going to get us not just a temporary boom, but actually a long run Increasing growth and you and that's a question economists have taken seriously. They have studied Very carefully and it just doesn't seem to be in the data that you look at whether You know people work more when you cut their taxes or do they do we see more entrepreneurial activity? And it just the the the estimates are that yes We see some and it's precisely estimated to be really small So I think we're not going to get big benefits to the economy from the tax cut other than in the short run When we really don't necessarily need it And it is going to be something that leaves us with a really high debt to GDP ratio Which means in the future? We won't be able to to take actions It's also crowding out good things governments could be doing right if you're spending all of that money on tax cuts You're not spending it on public education. You're not spending that on Infrastructure you know sort of things that I think would make us more productive over the long run Yeah Hello, my name is Mark of all. I'm a sophomore economic student and my question is What is your opinion on how the impact the countries are impacted the most work smaller countries? That really went all in into globalization and codependency when it comes to their economic stature and Like other countries like United States China and things like that who had a sufficient domestic Economy was able to sustain themselves and kind of recover faster Would you say that this could be an example of why there's a raise in kind of nationalism and the income? economic stature in their own countries All right, so a complicated question. So let me start with the first part which is You're you're absolutely right that That the crisis sort of spread from countries like the US and the UK to a lot of other countries I think one thing I'll say is it wasn't completely obvious that that was going to happen So I can remember discussions in you know late 2008 Where we're trying to figure out what was going to happen to the American economy and one sign was you know We were headed off a cliff and the other was well Maybe we're having all these financial troubles, but our trading partners Perhaps are not and so they can help to to keep us afloat And one of the things that we learned in January and February of 2009 is no the rest of the world was not going to keep up Us afloat they were going to come down with us if not harder So for example, I remember vividly when the numbers for South Korea's GDP came in in in January and February 2009 and they were just wretched right and so so I think this this idea that trouble the means just it's exactly like Your average American that had nothing to do with the financial crisis was caught up in the consequences Likewise our trading partners who were not part of the housing bubble and bust or whatever were caught up in this in the same thing So I think that is You know that is certainly a consequence of having a very interdependent world economy I Think the you know I think it also points out why it's really important that no one country can just perform their financial system and say everything's fine Right. We are so interrelated with other countries that we sort of all need to be taking measures to make our Our financial systems more secure, but I think your point that that is not only important for the United States It's important for a lot of other countries around the world On the the rise of nationalism. I think it is you know, it's it's not my air of expertise But I think it's just an amazingly important issue and to figure out You know as one who was in Washington when that first wave of the the Tea Party Rallied in Washington. I think just the I'm not sure You know where it's coming from. I think there was some some very real pain and that that you know people were angry I Think not angry about you know They should be angry that Banks did what they did and whatever it somehow turned into anger at the government for trying to deal with the problem And that struck me as as very short-sighted because exactly what you want in that situation is not To let everything go to hell because the main people that will be hurt Are exactly the the people that were were in fact hurt and we're struggling Yeah Thank you for the lecture. I was just wondering of your opinion towards the modern monetary theory that claims that country like the United States or With with this own currency could infinitely fund of its fiscal spending So So, yes, so that I mean one of the things that that right so I've been talking a lot about monetary policy space of saying that when The interest rates the main thing we think of central banks is doing or what we think of as as monetary policy when those get to zero there's not much they can do and What the question makes clear is that in fact there are things that central banks can do they can affect people's expectations? they can You know buy unusual things and by that affect, you know Different interest rates mortgage rates things like that and in the extreme case you can just print money and use that you know to pay for fiscal expansion I think Realistically the main tool that central banks have is cutting interest rates And so though we can talk about Surely if you know the Fed prints enough money we could use that to fight a crisis or whatever I think one they're not going to do that in the second is It's not it's not as easy as perhaps it sounds So I think the answer is that we mainly have to use the our the main tool We have is our conventional tools and so thinking about how to have those conventional tools. I think is important Yeah, I have to say I've never seen such audience participation. This is this is fantastic Student at QCC Quincy come on the community college. I'm all the way from Worcester here to come. Well, thank you Yeah, it's an honor. So I have two questions. I think if you came all the way from what you get two questions I have three that's only two Make it short. So In September 12 USA Census Bureau released that national In 2017 that 29 million people were like four So and here that makes 29 million people that makes out of 12 23 of population one in eight so What's the government or the new governments could be done through to the defeat the poverty especially the kid the The kids like like child poverty is like it's it's increasing So this is a question one. Okay. Yeah, and secondly here Well, as we know United States it's it's spending and well American spending in military so six 610 billion so in the military So combine five countries here if I can see here Germany India United Kingdom France Saudi Arabia Russia and China So if we combine those countries, it's going to be minus minus nine billion dollars and America it's like it's spending the one country spending that's a lot America has a right to defend itself Totally agree every country has a right to defend itself, but right way So and what is it you take as you serve I thank you for your service and their Obama administrations I really I voted for him the second term So the first time so I was I I wasn't citizen. I came from Morocco So and and you serve in the government So if you get a chance to be an advisor next term who knows I Love to see you. You want me to solve the problem. So what do you do? What do you will do or you're your staff? What do you want to do to eliminate or I mean? It's it's an incredibly mean so great to question. Thank you I'll give you an idea. So mean I think there are so much to say one is I take a certain amount of Pride in the fact that You know in the at the same time that we are taking all of these actions to try to deal with the crisis What did President Obama? Decide he wanted to he also wanted to try to do health care reform at you know at the same time because I think He not only cared about the short run problem of we were having a terrible recession But he understood you know He'd run on economic issues long before the crisis because he was concerned about poverty Child poverty in particular And so I think that that is it is really important to to keep that in mind and and good policy makers Compassionate policy makers can do more than than one thing. So I think that I think that that's crucial I think your question also fundamentally goes back to someone who asked me about the tax cut, right? I think fundamentally, you know, you know, there are certain truths, right? You can't just run big budget deficits forever, right? eventually the bill comes due and so you've got a you know I think one of the frustrating things is we understood that as a country through you know kind of 1980 or whatever and then or maybe not quite all the way to 1980 and then it's like Namely we can you know run budget deficits forever and We really you know, so we lost this idea that when you want to do things you have to pay for them So we have a bunch of tax cuts that we don't cut spending or raise other revenues or we have spending that we don't raise taxes to pay for and What's happened in the US budget is exactly some of what you've described so we you know We don't tend to cut defense And so what do we cut we cut kind of all the other stuff that is also really good so all of the money that you know helps education and children and Basic scientific research and infrastructure those are the things that we're not investing in Because we're doing a lot of defense because we want to cut people's taxes because we want to you know spend money on Healthcare for seniors, which I think is great But you know you've got to think about You've got to make choices and it does seem very wrong in a country as rich as the United States That we have children who still don't have enough to eat or that live in Terrible conditions The other thing I like so much about your question so much of the discussion in recent days has been or recent years Has been about rising inequality and and yes, I think that is a problem for the fabric of society But at some level I care less about if some people at the top have a ton Then I do about if they're people at the bottom that don't have enough and so I think focusing more on You know, maybe less on inequality and more on how do we provide for? the bottom of the income distribution so they have a decent life a Chance to see their children do well I think that is what I'm really passionate about and and I don't think it's that hard, right? so I think Americans in general are compassionate people and They don't want to see any child go hungry at night And I think you just need policymakers that but respect them enough to say here are the choices that you're facing You know, I think this is how we should do this. I think we should have universal health care I think we should have You know making sure that you have wage subsidies so no one earns From a job, you can't have a decent standard of living But you've got to you can't just wish that or just let's do that on top of everything else. You've got to make the hard choices Yeah I'm a freshman student here. I'm studying economics So I'm just beginning to get equipped with the tools to analyze issues such as the financial financial crisis But as wondering if it was ever a concern among the members of the council that certain segments of the society wouldn't recover from the recession as fast as the others based on their say ethnicity or age group or geographical location and if so what what sort of policies were adopted by the council to ensure a Equitable recovery in society from the recession. Oh, that's it. That's a great question I did and actually one of the the first things that I did with someone else who was in the administration Jared Bernstein is actually to look at How you know if the unemployment rate goes up to age or 10% that doesn't affect everyone equally Right, so there are some people that are going to be much more affected than others and that goes to you know thinking about what policies you want do you want, you know policies that You know affect the the workers that may be particularly affected or think about that state fiscal relief that we know that the Effects of the crisis weren't felt evenly across the country and it makes sense to put more of your Stimulus resources into places that are suffering more. I think the thing that I feel actually Passionately about that I feel we learn from the crisis Was something that we were worried about which is a phenomenon called Historicis that when someone's been Unemployed for a long period of time it becomes much harder for them to get another job There gets to be a stigma and they tend to drop out of the labor force and so I think part of why I mentioned that I'm sitting there saying we need more stimulus we need more stimulus It was exactly that fear that if you have people that are out of work for a year or two years They are likely to never recover and and so I think the probably the The best thing that we could have done is to just generally try to get the recession over faster And that's why I feel the kind of letting up on fiscal stimulus letting up on monetary stimulus The kind of happen in 2010 2011 was really unfortunate because I think we had an opportunity To end it faster and it driveled along for a while But certainly you could target policies better as well, and I think that would would also be important All right. Thank you Well first off, thank you so much for being here we really appreciate it's a great opportunity for us Moving forward, do you feel like? What areas of government spending could be curtailed in order to decrease our debt to GDP ratio? And then what do you think would cause the next recession recession? What do you think are the strains in our current economy? Oh? Both good questions, and you haven't you didn't even come all the way from Worcester So I think in it is a it's very wise for me to say we need to make tough choices and say okay, lady What would your tough choices be? So first I'd be happy to pay more taxes, so I think we rather than than cutting taxes I think we ought to to put our money where our mouth is and and support the things that we think are good But there's certainly some wasteful spending that can be cut I'm probably with the person who said perhaps we could spend a little bit less on defense And so I can I can certainly imagine that we could do that much better Agricultural subsidies that at one time and the depression was designed to help the family farmer is now You know transfers to big agricultural corporations that I'm pretty sure don't need them And so I think that would be an area where I would cut I Do think on health care right? We know that that is the part of the budget that is growing rapidly in Large part because we keep coming up with good new expensive Technologies and that's great But to the degree that there's waste or that we could you know get the same outcomes in a more cost-effective way and the Statistics suggest that we can I think we do need to think about doing things like that so we need to actually part of what we tried in the Affordable Care Act was to not only expand coverage, but to say how do you slow the growth of health care spending and? Do better right so it's not trying to take away useful spending is like let's we know best practice Often best practice is even less expensive. Let's do those things So I think we do have to just reality is that the that health care is a huge part of the budget So figuring out how to get more efficiency there and not do What what is it? Don't do stupid things. I think that's a really important part So that that's where I that's where I would try to to rearrange the budget. So thank you I don't have a question Thank you for a very interesting presentation Thank you very much for Taking your time to come and be with us and on behalf Economics department, it's my pleasure to present you with a very nice present. I Don't know. There's that ugly picture And welcome home, thank you. I just have to say you are the nicest audience I've ever been I I swear, I feel we could have talked all evening. So just thank you for the great questions And it was really an honor to be here